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As a result of the pandemic, explain which curve(s) shift in your AS/AD model, in which...

As a result of the pandemic, explain which curve(s) shift in your AS/AD model, in which direction, and why. (Credit is given only if the explanation of why the curve(s) would shift is included. Which spending variables – C, I, G, X, M – have been affected and why? What about SRAS? LRAS?)

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Answer #1

As a result of the pandemic both the SRAS and the aggregate demand curve will shift to the left. the aggregate demand will shift to the left because the consumption and the exports and investment in the market will decline and the SRAS will shift because the supply chain around the world is affected because of this pandemic.

LRAS will not be affected because that represents the capacity of the economy to produce and that will not fall because the labor, technology or the capital are not affected in the market.

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